Industry counters CHH log price leadership bid

By Nicholas Bryant

Friday 6th October 2000

BUILDING: Demand dropping

The Timber Industry Federation says Carter Holt Harvey, previously the most preferred supplier of logs to mills, is one of the least favoured.

The change of heart is the result of a hard-nosed price leadership strategy designed to raise the domestic price of logs before many of CHH's forest assets mature in the next five years.

The federation said smaller suppliers such as Ernslaw One, Rayonier, Weyerhauser and Wenita Forest Products were market favourites.

Also back in favour was Fletcher Forests with increased product coming from its controversy-dogged Central North Island Forest Partnership.

But Carter Holt Harvey Forests chief executive Jay Goodenbour said superior quality and security of supply meant demand for CHH's logs was still high.

He also said other large forest owners would be using flawed logic if they dropped prices in a bid to gain market share.

"I don't believe our shareholders would criticise us for trying to hold the price of wood up and I don't believe Fletcher Challenge's shareholders would criticise our leadership either," Mr Goodenbour said.

He called for other local log exporters to support Carter Holt in its bid for greater market share by matching prices.

"Obviously you're hoping Fletchers and the others will be smart enough not to drop price to export markets but that's a big step," Mr Goodenbour said.

But CHH's ability to wield supply power in foreign markets is limited, with the country's entire forest industry supplying only 1.1% of world and 8.8% of Asia Pacific's forest products trade.

One analyst was critical of the timing of CHH's strategy, saying it would work only if demand looked set to exceed supply.

With interest rate-sensitive Australasian building cycles heading down in the short- to medium-term, he believed CHH's punt might backfire.

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